Fannie Mae and Freddie Mac announce plans to re-introduce low down loans.
The “Great Recession” had done a lot to change things in real estate, especially when it came to qualifying for a home loan. Standards had tightened in an attempt to correct mistakes made by practices such as “sub prime” and “stated income”, which had helped fuel issues that led to the near collapse of the industry a half decade ago.
Fortunately, our recent economic upturn has once again led to decisions that can help even more qualified home buyers into the marketplace. While some standards are still very much in place to insure buyers can actually AFFORD the home they are purchasing, a return to some common sense practices should help fuel a continued positive pace for the real estate industry.
Fannie Mae and Freddie Mac are government agencies that back a wide variety of mortgage loans, providing home buyers with a variety of options. While they already back mortgage loans with as little as 5% down, they recently announced they’d back loans with down payments as low as 3%.
There are just a few strings attached, however.
These loans may be approved for buyers with a credit score as low as 620, but they do also require Private Mortgage Insurance (PMI) for those who wish to take advantage of the program. This adds another 1.35% to the monthly mortgage rate. The good news is, PMI may be cancelled once the loan balance is below 80% of the home’s Fair Market Value; meaning that either you can pay down the loan, or simply wait for the property’s equity to rise sufficiently enough above its original value at the time of purchase.
There are plenty of loan options available.
This is a great time to consider purchasing a home! Interest rates are still below 4%, and housing prices are holding steady through the end of the year. Don’t wait too long, though. Lock in your rate today to insure you can access maximum purchasing power. Contact the Lichen-Hooper Real Estate Team today for more information.